If it was treated as investment interest on the 1041, it is a grey area as whether it can be carried out to beneficiary as investment interest. I've researched it a couple times but not in the last few years. I seem to recall this is because the rules on excess deductions on termination were written before there was such a thing as investment interest carryover. So investment interest was not included in the list of what constitutes excess deductions on termination.

And I guess tax software is presenting excess deductions in a new way. I'm working on a final Trust 1041 whose only deductions - state taxes- are greater than the income. The K-1 11B has a statement that this is state tax. Don't think I've seen that before.